Archives of “elephant” tag

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Three Blind Men And The Markets

  
  Education
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elephant-3

A Hindu folktale tells of three blind men encountering an elephant. “It’s a tree,” says one, stroking a leg. “No, no, it’s a snake,” says  another, feeling the trunk. “No, this must be a house,” insists a third, spreading his arms against the bulk of the elephant’s body.
 All three had a different perception of the elephant based on the part they examined, and all three conclusions were wrong. The elephant was larger and more complex than any of the men realized.
 A similar tale is told everyday in the market. Each market participant has different needs, agendas, histories, perceptions, and sees the market completely differently. As with the three blind men examining the elephant: (more…)

7 Scariest Things A Trader Can Do…..

  
  Education
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  1. Taking a trade with NO EXIT STRATEGY that is a horror movie. It is dangerous to not have a stop loss when you enter a trade becasue if a trader thinks they bought in at a great price the price starts looking better the lower it goes, and terror of all terrors the trader adds more to the trade! It only takes one mistake letting one trade run into a huge loss and add to it to blow up an account.
  2. Shorting the strongest stocks in the market during a bull market is scary as they continue to go up.
  3. Going long a stock in a death spiral due to a business misstep or earnings decline is like riding a roller coast that generally ends up much lower when the trade is finally closed.
  4. “Going all in” on one trade, with this plan all it takes is one bad trade to blow up your account, those are scary odds.
  5. When you are losing you go from your trading plan to “plan B” “hoping” maybe even praying for a reversal. When a trade turns you religious and leads you to pray it is definitely time to get out!
  6. Asking for others opinions instead of following your trading plan or methodology is very scary, time for homework not tips.
  7. It is terrifying to watch someone fight a trend instead of follow it. The bigger they go against the trend the scarier it gets. They are trying to stand in front of an elephant walking and tell it where it should be going.

Trading Against the Elephant

  
  Education
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Once upon a time, there were six blind men. The blind men wished toknow what an elephant looked like. They took a trip to the forest and with the help of their guide found a tame elephant. The first blind man walked into the broadside of the elephant and bumped his head. He declared that the elephant was like a wall. The second one grabbed the elephant’s tusk and said it felt like a spear. The next blind man felt the trunk of the elephant and was sure that elephants were similar to snakes. The fourth blind man hugged the elephant’s leg and declared the elephant was like a tree. The next one caught the ear and said this is definitely like a fan. The last blind man felt the tail and said this sure feels like a rope. Thus the six blind men all perceived one aspect of the elephant and were each right in their own way, but none of them knew what the whole elephant really looked like.

Oftentimes, the market poses itself as the elephant. There are people who say that predicting the market is like predicting the weather, because you can do well in the short term, but where the market will be in the long run is anybody’s guess. (more…)

The Blind Traders and the Market

  
  Education
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blind-men

There is an old parable known as “the blind men and the elephant.”  In this story, there are four blind men who are asked to determine what an elephant looks like.  The first blind man feels the leg of the elephant and says, “The elephant is like a tree because it is large and round like a pillar.”  The second man feels the tail and says, “The elephant is like a rope because it is small and coarse.”  The third man feels the ear and says, “The elephant is like a fan because it is flat and thin.”  The fourth man feels the trunk and says, “The elephant is like a snake because it is long and curves.” 

A king comes to the four blind men and says, “all of you are correct.”  The king goes on to explain that each one had drastically different descriptions of the elephant because they are all feeling different parts.  So, they are all correct.  The elephant has all the features described by the four blind men.

This parable is a good analogy describing different types of profitable traders. Many of the arguments that erupt between traders on social media are due to not understanding the others  time frames or not understanding the other trader’s position sizing, stop loss level, or expected winning percentage. Also too many cult members of Elliot Wave, Trend Following, Market Profile, Day Traders, and option traders etc. think their way of trading price action is the only way when their way is only one of many paths to profitability. There are as many ways to trade price action to be profitable as there are profitable traders.

The elephant in the room is that profitable traders do a few things in common: (more…)

Brain test Learn to trade self assesment

  
  Education
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giraffe_in_refrigeratorThe Giraffe Test

1. How do you put a giraffe into a refrigerator?

Stop and think about it and decide on your answer before you scroll down.

The correct answer is: Open the refrigerator, put in the giraffe, and close the door. This question tests whether you tend to do simple things in an overly complicated way.

2. How do you put an elephant into a refrigerator?

Did you say, Open the refrigerator, put in the elephant, and close the refrigerator?

Wrong Answer.

Correct Answer: Open the refrigerator, take out the giraffe, put in the elephant and close the door. This tests your ability to think through the repercussions of your previous actions.

3. The Lion King is hosting an animal conference. All the animals
attend …. Except one. Which animal does not attend?

Correct Answer : The Elephant. The elephant is in the refrigerator. Didn’t you just put him in there? This tests your memory. Okay, even if you did not answer the first three questions correctly, you still have one more chance to show your true abilities. (more…)

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